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Bailout would be bad move for Detroit — and the rest of us

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Thursday, Aug. 8, 2013, 12:01 a.m.

Don't let anybody think Detroit is “too big to fail.”

It might instead be the biggest business challenge of the year precisely to let the city fail. Pain would have to be parceled out among all the creditors to do any good: municipal bondholders, vendors of goods and services to a deadbeat City Hall, and thousands of city retirees and politicians who went off into the sunset on a hollow promise to be pensioned handsomely lifelong, some as young as 50.

It is, of course, sad all around. But the alternative is economically nuts. That would be a federal bailout, for which we'll certainly hear compassionate pleading. Handing the bill to the rest of us would only weigh on the economy and not teach dozens of spendthrift cities like Detroit a lesson.

Think $18 billion.

That's at least how deep in overdue bills and unfunded liabilities elected leaders and employee unions took the Motor City before Emergency Manager Kevyn Orr filed for bankruptcy reorganization last month.

Catch that title, emergency manager? Not mayor, you'll notice. Orr had to be appointed by the governor of the state. Michigan's biggest city got so irresponsible in its 50-year slide from greatness that it couldn't govern itself. Democracy struck out.

Labor habitually wanted “more” at contract times, and elected officials went along because they still wanted to be elected. It was a mutual backscratch with the unions. And neither side seemed to notice the citizenry, jobs and businesses fleeing. The city, at 700,000-odd population, is a third of what it was at mid-20th century.

But a case for Uncle Sam To The Rescue? No way.

Yes, we bailed out banks “too big to fail.” And General Motors and Chrysler. But in those cases, financial terror was applied. The national and world economies are so interconnected now, we were told, that failure of the giants would spread, infect others and bring global Depression. We bought it.

But a failing city is different. The damage in a Detroit bailout would be more Detroits. Every public treasury over-milked by its politicians and unions would go clamoring to Washington. Might as well flash a green light to keep abusing the system.

The air is already filled with bad ideas to shield Detroit from retribution. One trial balloon would have the federal government raid an alleged surplus set up for Obamacare. Another would sell treasures of the Detroit Institutes of Art, never mind that it's a tourist draw that will bring in dollars long into the future.

Bankruptcy isn't an end; it's a beginning. Bondholders will lose but not every­thing, and pensioners' checks won't fall to all zeroes. What an opportunity in fact for retirees' families and charitable institutions to give the oldsters a helping hand.

Detroit's community groups ought to brainstorm new programs to improve neighborhood peace without more police. And are teachers unions listening? Better schools would bring people back to any city. Why not also explore the budget savings in privatization of more public services?

One thing Detroit mustn't do is raise local taxes, a sure way to repel business and resurgent population.

Who knows but that we're witnessing the birth pangs of the comeback of a great city. Wasn't it an urban politician who said never let a crisis go to waste?

Jack Markowitz is a Thursday columnist for Trib Total Media. Email

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